They’ll pay me to quit? Hmmm
For the AJC
Friday, September 12, 2008
You’ve seen the signs for months — closed-door meetings, downward-spiraling financial reports and negative industry rumors. Still, being offered a voluntary buyout can hit you like a sucker punch.
Do you stay or go? It’s no easy decision because it affects your emotions, your finances and your career.
Photos by Leita Cowart / Special
Career expert Bill Chambers says workers who agree to buyouts need to have clear, realistic ideas of what they will do next.
Dan Henning, CPA and shareholder with Atkinson, Henning & Associates, and member of PSM Capital Managament LLC.
Dealing with the emotions
Even if you’ve been expecting it, seeing the letter in black and white is a shock, said Michelle Tullier, vice president for career transition consulting with Right Management, a global organizational consulting and outplacement firm.
“As with any trauma, there’s a grieving process. Give yourself a little time to let the emotional ups and downs run their course,” Tullier said. “You have to clear the emotions before you can look at the options clearly. You don’t make good decisions when your emotions are raw.”
One of the emotions that many people experience is fear of the job-search process itself. “If you’ve been working for the same company for a long time, you may not be up on all the current methods of job searching, like Internet applications and Linked-In and other networking means,” Tullier said. “It can all seem overwhelming.”
Take advantage of your company’s outplacement provider for career coaching and job search assistance or find a private coach.
Tullier tells people to seek ideas and input from people they trust and to remember that being asked to leave a job “happens to all sorts of good people, almost every day,” she said. “So often you hear later that it turned out to be a blessing in disguise. People often go on to make exciting career changes.”
The practice has become so commonplace that people shouldn’t fear negative reactions from future employers. “There’s almost no stigma attached to taking it, if you decide that it’s the right decision for you,” Tullier said.
Looking at the finances
A generous severance package can seem like a windfall, but a lot depends on your personal situation. A 63-year-old senior executive who planned to retire soon anyway is in a different boat than someone in his early 50s with a house payment and children still in college.
“First, determine your current budget needs and evaluate your long-range financial commitments. Do this with your spouse,” said Bill Chambers, president and CEO of Executrack, a talent management, leadership development and career transition consulting company in Atlanta and Florida. “Will there be enough income to help you make a career transition?”
He advises clients to consider their age, industry, job description, location and salary requirements when deciding. “You need to estimate how long it will take you to find a new job, if you need one,” Chambers said.
Older workers generally take longer. “Someone making $20,000 to $35,000 may easily find a new position in a couple of months, but someone making $100,000 or more could take six months or longer to get rehired.”
With so many financial factors to consider in a short time, he tells clients to seek the help of a financial adviser.
“If you are a higher-income worker, the company is likely to include features in the package to make it attractive. They want you to take it,” said Dan Henning, a shareholder of Atkinson Henning & Associates PC, an Atlanta-based financial and accounting firm. “The question isn’t whether it’s a good deal or not, but whether it’s a good deal for you. The financial aspects, tax and retirement implications make it a complex situation.”
A financial adviser can help you sort through:
» The best way to take the money. There may be a choice of packages. Is it better to take the lump-sum severance without benefits or income paid out over the next six to 18 months with benefits? Sometimes the lump-sum amount is discounted, but “if you can invest it wisely, you could earn more money on it,” Henning said.
» Retirement and investment considerations: “If the package bridges you to early retirement, does it mean that your pension will be fully vested? Will they actually keep you on the payroll so that you can continue to invest in your 401(k), and will they continue to match your contributions?” Henning asked. If you aren’t planning to retire, can you roll your 401(k) into your next company’s plan or into an IRA? What about stock options? How long do you have to exercise them?
» Health insurance costs: “This is a key ingredient in the package,” Henning said. “Will they keep you on the company plan for the buyout period or switch you to COBRA benefits? Will they pay the premiums, or do you have to pick up the costs?” If you choose a lump sum without benefits, the cost of insurance premiums must be factored into the budget. A financial adviser can help you bridge to another insurance plan.
» Tax implications: Is the severance package considered lump-sum pension or income? If income, your employer will withhold state and federal taxes, as well as FICA. “If you get another job and are drawing two salaries, or if a lump sum spikes your income, there will be tax implications,” Henning said. You can minimize the tax hit of being put in a higher income bracket by making more charitable contributions, prepaying your taxes for next year or using other strategies proposed by a tax adviser.
Managing your career
Jackie Sherman, CEO and president of the Jackie Sherman Group, an organizational change consulting company, was able to leverage buyout situations twice to get what she wanted.
“In 1994, I was working for Digital Equipment Co. in Boston. The company had been through several rounds of layoffs, and I told my boss that I wanted to move to Atlanta and I wanted him to help me,” Sherman said. “I asked to be put on the next layoff list.” She knew she was taking a risk, but it paid off. Her boss did put her on the list. She requested outplacement services in Atlanta, and within two weeks she had packed and moved. Those services and her severance pay helped her find a new job.
The next time she was faced with a possible layoff, she took a proactive position again because she was ready to start her own business. If you’re paying attention to the signs, you may be able to position yourself in order to get what you want for your next career move, she said. But even if you’re blindsided by an offer, “you should know what you want and take advantage of all the resources offered,” Sherman said.
“The first question to ask when offered a voluntary layoff is, ‘What is it I want to be doing?’ ” she said. If you know where you are headed with your career, you’ll make a better decision and will feel more empowered.
“A buyout may allow you to leave a job you don’t really enjoy for something you’d rather pursue,” Chambers said. “Are you ready for early retirement and other activities, or is your whole identity tied up with this job and company?”
You need to assess the need for your skills — both internally with your present employer, and externally in the job market, Chambers said. “Do some research on the Internet. See what positions are open,” he said. If your industry is shrinking, do you have skills that would allow you to switch to something else? Could you get training to become more marketable? Are you willing to move to secure work?
“You may want to start your own business, but you need to be realistic about all that entails,” he said. “Starting a business isn’t easy and requires multiple skills and a nest egg. It’s not for the faint of heart. If your financial needs are great, staying or using the buyout to help you look for a new job may be your best option for now.”
“Even if you stay, you won’t be working for the same company culture,” Sherman said. “The ownership and values may shift. Voluntary buyout offers may lead to involuntary lay-offs.” You run the risk of being asked to leave anyway with a less-beneficial severance package.
“There’s a lot of impact on the survivors who decide to stay,” said Tullier, author of eight career books, including “The Unofficial Guide to Landing a Job.” “You’ll likely be doing the job of more than one person and morale may be low.” On the other hand, you could find yourself promoted.
Regardless of what you decide, consider a voluntary buyout offer a wake-up call, Tullier said. “Even if you decide to stay, dust off and update your résumé, expand your contacts and start keeping a log of your achievements. This is the time to think about long-term career planning.”